Note on Section 74(3) of the Land and Conveyancing Law Reform Act 2009 and the recent High Court decision of Adrian McNamara, practising under the style and title of Murphy McNamara Solicitors v. Peter McCann & Joan McCann [2016] IEHC 443.

This case refers to Section 74(3) of the Land and Conveyancing Law Reform Act 2009 which states that “any conveyance of property made with the intention of defrauding a creditor or other person is voidable by any person thereby prejudiced”.

This case arose from an appeal from the Dublin Circuit Court to the High Court. In the Circuit Court, an order was made on the 12th March 2015 in favour of the plaintiff declaring a conveyance made on the 5th November 2010, by the first named defendant and the second named defendant to the second named defendant, was void. The Judge further ordered that conveyance be set aside.

Facts

The background to these proceedings is that the plaintiff is a solicitor who represented companies in extensive legal services, of which the first named defendant was the director. In 2008, the companies went into difficulty. However, the plaintiff continued to work for the first named defendant on foot of an oral agreement by the first named defendant to the effect that his legal costs would be covered. This was never recorded in writing and in May 2010, the companies went into liquidation and the plaintiff sought enforcement of this assurance. The plaintiff sent a letter to the first named defendant in relation to fees on the 9th August 2010 and further letters on the 17th and 18th August 2010 threatening to institute legal proceedings unless an alternative adequate proposal to discharge fees was offered. The plaintiff issued proceedings on 30th May 2011 and obtained judgment in default of defence in the sum of €411,845.22 as against the first named defendant on 15th May 2012. When the plaintiff carried out a search of the first named defendant’s assets to discharge his fees, the conveyance of the defendants’ family home dated 5th November 2010 was discovered.

Plaintiff’s Argument

It was argued on behalf of the plaintiff that this conveyance is void by reason of it being made with the sole purpose of defrauding the plaintiff in relation to the debts due. In reply to the Defendants’ claim that the original conveyance was executed in their joint names in error, the plaintiff called into evidence the solicitor who sold the property to the defendants in 1993. He gave evidence to the effect that the contract for sale involved both defendants. It was never suggested to him that an error had been made. The plaintiff also argued that further evidence proving that no error had been made and the property was intentionally transferred into both of the defendants’ names, is evidence of a subsequent conveyance of a portion of the property to a third party and this conveyance was completed by both defendants.

Defendants’ Argument

The argument put forward by the defendants was that although such a conveyance occurred, no personal assurance was given with respect to legal fees due. The first named defendant denied being aware that the plaintiff was pursuing him for the debts owed at the time the deed of conveyance was completed. As previously stated, it was alleged that the property was originally registered in 1993 in both of their names in error and should only have been in the name of the second named defendant by reason of funds of the second named defendant being expended to acquire the same property. The second named defendant gave evidence to corroborate this.

Judgment

In his judgment, Binchy J. applied s. 74(3) of the Land and Conveyancing Law Reform Act 2009 which states that “any conveyance of property made with the intention of defrauding a creditor or other person is voidable by any person thereby prejudiced”. Binchy J. also made reference to the case of Keegan Quarries Limited v. Michael McGuinness & Marie McGuinness [2011] IEHC 453, in which Finlay Geoghegan J. stated that the authoritative case on the fraudulent intention required for a conveyance to be fraudulent was the case of Re Moroney [1887] 21 LRIR 27. Palles C.B. sets out two principles; firstly, that the conveyance must be fraudulent, and secondly, the class of fraud must be an intent to delay, hinder or defraud creditors. Finlay Geoghegan J. noted that these principles also apply to s. 74(3) of the Land and Conveyancing Law Reform Act 2009.

Decision

Binchy J. in handing down the decision on the 21st July 2016 held that the defendants were fully aware that the plaintiff was intending to pursue the first named defendant for the debts at the time of the conveyance. Not only this, but this was their sole motivation behind the conveyance. It was also held that the conveyance was made with the express intention to defeat, delay or hinder the plaintiff and to defeat any potential claim of the plaintiff. No evidence was produced to support the argument that the conveyance of the property into their joint names in 1993 was a mistake. Ultimately, the Judge affirmed the order made by the Circuit Court declaring the conveyance void and dismissed the appeal.

Philip O’Leary is a Partner in the Commercial Litigation department in FitzGerald Solicitors of 6 Lapps Quay, Cork.